July 2012

The term “European Theater” was first coined during World War II. Today in the financial markets, the term has come to symbolize an ongoing soap opera, where the audience is continually held in suspense as the bad actors (the politicians) promise actions and solutions to current crises, which have been created by their prior actions. Each time solutions are proposed, the audience breathes a sigh of relief (i.e., relief rally …Read More

On July 6, the country received another disappointing jobs report. For the month, the establishment survey indicated jobs grew by 80,000; for the quarter, such growth averaged 75,000, about one-third of the 26,000 monthly average for the first quarter. Clearly, the worldwide slowdown in Europe, China, India, Brazil, etc. is having an impact here. Deleveraging and slow growth Let’s be clear. We are in the midst of a worldwide debt …Read More

Since the world adopted Basel I in 1988, it has allowed the Europeans to dictate the bank capital regime for major industrial economies. We are now in the process of adopting Basel III capital rules. Unfortunately, these rules have so biased the financial system that the private sector, the engine of job creation, has all but been squeezed out.Under all of the Basel regimes, “sovereign” debt is considered riskless. Everything …Read More

This is a mid-year overview of the economic and policy issues in the U.S. and worldwide, both positive and negative. I have divided the issues into economic and policy issues. With enough political will, policy issues can be addressed in the short run, while economic issues are longer-term in nature and are clearly influenced by policy. Positives • Cheap energy (economics and policy): There is growing recognition that cheap energy …Read More

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